$5 Million Reportedly Stolen Amid Terraform Labs Bankruptcy

On Wednesday, July 31, the Terra Luna chain experienced a temporary halt due to a suspected exploit. The Terra hack announcement, made via Terra’s official account on X (formerly known as Twitter), notified users of the imminent halt at block height 11430400. During this time. Hence, all transactions on the network ceased as developers and validators worked to address the issue.

Inside The Latest Terra Hack

“Attention Terra users: Please be advised that the chain will be halted shortly at block height 11430400 and transactions will not be processed during this time,” the Terra team warned its users. Furthermore, the team raised suspicion on a potential Terra hack and promised necessary steps to combat the mishap. They added:

We will be working with the validators on Terra (phoenix-1) to apply an emergency patch thereafter to remediate a suspected exploit.”

An unidentified attacker exploited a vulnerability in a third-party module known as IBC hooks, used for cross-chain contract interactions and token transfers. This exploit allowed the attacker to siphon off value from bridged assets, impacting tokens such as USD Coin (USDC) stablecoin and Astroport. Moreover, preliminary assessments suggest that around $5 million in tokens might have been affected.

This Terra hack announcement led to a notable drop in the price of Terra Luna Classic (LUNC). The crypto fell over 4% following the announcement. Despite the initial decline, LUNC managed a significant recovery. As of writing, the LUNC price dipped by 2.84% to $0.00008116 on Wednesday.

Also Read: Terra Luna Classic To Raise LUNC Burn Tax To 1.5%?

Stolen Assets Report

The Terra chain experienced a significant security breach due to an unpatched vulnerability. The exploit allowed the attacker to mint tokens that had been Inter-Blockchain Communication (IBC) transferred onto Terra. The Terra hack vulnerability has surfaced amid crucial Terraform Labs bankruptcy deadlines.

For context, By utilizing a smart contract, an IBC call with IBC hooks, and a timeout mechanism, the exploiter managed to gain unauthorized access to these tokens. As a result, substantial amounts of assets, including 500,000 USDT and 2.7 BTC, were compromised. The Terra team is actively investigating the incident to determine the exact nature of the exploit and to patch the vulnerability.

The exploit followed a specific sequence of actions. A smart contract was instantiated on the Terra blockchain, which was then called using an IBC transfer that timed out. This timeout allowed tokens to arrive in the exploiter’s account.

Despite the exploiter’s wallet never receiving more than 56 LUNA and 7,800 USDC at a time, they managed to leave with millions of dollars’ worth of assets. The Terra team is working diligently to understand the intricacies of this exploit and to prevent future occurrences.

Also Read: SHIB Price: Shiba Inu Burn Rate Soars 7300%, Is a Rally Ahead?

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Kritika Mehta

Kritika boasts over 2 years of experience in the financial news sector. Currently working as a crypto journalist at Coingape, she has consistently shown a knack for blockchain technology and cryptocurrencies. Kritika combines insightful analysis with a deep understanding of market trends. With a keen interest in technical analysis, she brings a nuanced perspective to her reporting, exploring the intersection of finance, technology, and emerging trends in the crypto space.

Disclaimer: The presented content may include the personal opinion of the author and is subject to market condition. Do your market research before investing in cryptocurrencies. The author or the publication does not hold any responsibility for your personal financial loss.